Amazon Go and the Future of Quick Service Restaurants

This week Amazon announced the Seattle-based beta launch of its (a) cashier-free (b) line-free (c) self-checkout-free (d) sensor-based food shopping experience. The typical convenience or grocery store UX includes: put items in cart; wait in line for an absurd amount of time; take items out of cart and place them on a conveyor belt; watch person in front of you attempt to pay by check; wait more; watch items scanned and pay for items; watch items get bagged or bag them yourself; and, maybe, put items back in cart for external transport. Amazon Go would eliminate all of that. 

Instead, the entire user experience would be managed by way of sensors on the food items, sensors at the doors, and an app that catalogues the items once you place them in your bag and walk past the scanners on your way out. The transaction is paid for using your Amazon-linked credit card. For the technophiles among you, here is a summary - based on the filed patent(s) - of how this would work.

Now, initially, the Wall Street Journal and Business Insider reported that Amazon may roll this out to 2000 physical locations - which, if true, would put Amazon at a brick-and-mortar grocery scale of the likes of Kroger and Tesco. On Wednesday, Amazon denied that number.

What does this have to do with the restructuring community? On Tuesday, we discussed these developments with an Amazon employee and what follows is the (slightly-edited for length) narrative:

Amazon Employee: Curious to hear your questions and what your different angle is.

PETITION: Well [we're] in the restructuring space and so [we're] looking at it from the angle of "who gets f*cked?" if this concept takes off and scales to the Kroger/Tesco like level of 2000 stores. Wondering your thoughts there...? [Our] list of losers: manufacturers of conventional scanners...plastic separator registers...conveyer belts; landlords (maybe? - less square footage required without the cashier and self-checkout stations); print media/candy manufacturers/gift cards - all things that benefit from lines and impulse buys at checkout; human capital; people on the wrong end of income inequality.

Amazon Employee: I've noticed that because not many people have seen it in person they tend to over-index on the idea that this affects grocery stores the most. But really, when you go inside, you realize that this is for quick shopping. A family of 4 or 5 cannot go in and by a week's worth of groceries. Really this is going to impact the quick service restaurants and the real growing category is in-grocery-sit down eating. So this is really for 20-30s who live in a dense urban environment and want a quick breakfast/lunch/dinner that is healthy/fresh/organic.

PETITION. So, this would affect the Pret A' Manger types more? And how does this reconcile with the reports that this technology is meant to be deployed in 2000 stores: you're saying the 2000 number applies to the fast-healthy-casual concept? And a lot of what [we] said would seem to still apply, no?

Amazon Employee: There are a lot of rumors out there about 2000 stores etc., but those people have zero idea what that really means. Amazon is probably testing more than one concept so there's no way to know if Go is the only concept and how widely it will be deployed. But a lot of your losers - belts, candy, impulse buys - will definitely still be at traditional supermarkets. So the Go concept seems to map more closely to QSR and in-market-dining. So those seem to be the big losers here. Pret A Manger is a good example. 

For now, then, it seems that this is more of a supply chain exercise than anything else though we'd be remiss if we didn't highlight that nothing was said about potential job loss (statistics on cashiers here and a counterpoint to the common counter-argument about the ATMs/bank-teller dynamic here). That said, if this technology takes hold, there is no reason to believe that this wouldn't eventually affect incumbent grocers as well. And as we all know - and we here at PETITION have well covered - the grocery and restaurant space could do without additional headwinds. Here is the list of the top 50 QSRs in the United States for good measure.